Correlation Between Standard Bank and Aspen Pharmacare

Can any of the company-specific risk be diversified away by investing in both Standard Bank and Aspen Pharmacare at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Standard Bank and Aspen Pharmacare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Standard Bank Group and Aspen Pharmacare Holdings, you can compare the effects of market volatilities on Standard Bank and Aspen Pharmacare and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Standard Bank with a short position of Aspen Pharmacare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Bank and Aspen Pharmacare.

Diversification Opportunities for Standard Bank and Aspen Pharmacare

-0.71

Correlation Coefficient

Standard Bank  Aspen Pharmacare

Pay attention - limited upside

The 3 months correlation between Standard and Aspen is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Standard Bank Group and Aspen Pharmacare Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Pharmacare Holdings and Standard Bank is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Standard Bank Group are associated (or correlated) with Aspen Pharmacare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Pharmacare Holdings has no effect on the direction of Standard Bank i.e., Standard Bank and Aspen Pharmacare go up and down completely randomly.

Pair Corralation between Standard Bank and Aspen Pharmacare

Assuming the 90 days trading horizon Standard Bank is expected to generate 2.53 times less return on investment than Aspen Pharmacare. But when comparing it to its historical volatility, Standard Bank Group is 1.49 times less risky than Aspen Pharmacare. It trades about 0.02 of its potential returns per unit of risk. Aspen Pharmacare Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,315,300  in Aspen Pharmacare Holdings on September 23, 2024 and sell it today you would earn a total of  422,500  from holding Aspen Pharmacare Holdings or generate 32.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Standard Bank Group  vs.  Aspen Pharmacare Holdings

Standard Bank Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Standard Bank Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Standard Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aspen Pharmacare Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aspen Pharmacare Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Standard Bank and Aspen Pharmacare

The main advantage of trading using opposite Standard Bank and Aspen Pharmacare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Bank position performs unexpectedly, Aspen Pharmacare can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Aspen Pharmacare will offset losses from the drop in Aspen Pharmacare's long position.

The idea behind Standard Bank Group and Aspen Pharmacare Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.